The summer of 2007 has been a little ragged from a volume perspective hasn't it?
The sub prime and Alt-A problems started showing up in Acorn by mid May. Prior to that we were up nineteen percent compared to last year....after that we started falling behind in order volume.....the period May 16th to the end of August we were down fifteen percent. The sub prime and Alt-A crisis is part of the reason.
But it's only part of the reason in Acorn. The other part is particular to our market....after the hurricanes Katrina and Rita devastated the Gulf Coast in the fall of 2005, HUD placed a moratorium on foreclosure actions along the Gulf Coast. HUD lifted that ban in the Summer of 2006 and a back log of REO work began to move through the pipe line. That bulge continued through the end of the year.
That REO bulge from HUD is no longer there. That drop accounts for one third of the order volume loss...so the real impact of sub prime and Alt-A has been a drop of ten percent in our order volume. Acorn will likely be behind through the end of the year as a result of the REO factor.
Interesting, don't you agree? Do you know what impacts effect your volume of last year compared to this year? No? Maybe you should!
I'll bet you are thinking..."Well, Ken is just more on top of the accounting stuff than I....I can't do that."
Sure you can! And you should! Heck, I didn't even consider the REO factor in my looking at this year compared to last until Robert Dieudonne, one of Acorn's Bright Horses brought it up in a conversation with an out of state visitor to our offices last week. Dieu brought the point up when explaining our operations to the visiting appraiser. I just happened to over hear the comment, and that caused me to go back and push a few buttons in Quick Books.
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Good lessons for The Runt in that example, and good lessons for you if you want them.
- First, utilize your accounting program to analyze your business periodically. If you don't have an accounting program, maybe you should think of getting one...they are not expensive and can be a key tool to manage your business.
- Second, listen to everyone on your team. Each has a different perspective from which they view the business. I learn those perspectives by listening.
- Those perspectives can have a significant impact on your business.
In my case, I was viewing the sub prime and Alt-A as the primary reason for the business drop, and thought when it eased my business would be back to a growth mode. Now I learn that the last quarter of 2007 will have a much steeper hill to climb, and the chances of Acorn recovering that lost volume is lessened. That might impact my spending decisions for the remainder of the year......
Now, that brings me to another point.
My business is down. It's not going to kill me, but it is going to have an impact on NOI for the year. I'm guessing that most of your businesses are down also. In such times we should appreciate what business we have, and we should be eager to expand and build upon the relationships we have with our Cherished Clients. (If you don't have Cherished Clients...I'd recommend you get some.)
I was reading a discussion on a forum this past weekend. Someone had received an order for a 2075 form...it's essentially an inspection report. One use of the form is in the Desk Top Underwriting System of Fannie and Freddie. The DTU had analyzed the loan application and decided for various reasons that an appraisal is not needed to process the loan. Instead, a exterior "inspection" of the property by an appraiser is sufficient. No value estimate is needed. Pretty simple form. This was the first order of that type the appraiser had received, and he/she was wanting advice.
One responder commented that he hadn't had such and order in 15 years and would be insulted if he were to receive one. The word "insulted" caught my eye. Insulted that a Cherished Client wanted my opinion of an opportunity they were considering? That puzzled me, especially in a down market. I'm looking for business: up markets, down markets...doesn't matter to me...I'm looking for business and I'm looking for Cherished Clients. Always.
It Might be helpful to look at this "insulting order" from another perspective.
Let's look at this request from the client's perspective. They live there. The property is here. I am here. They are fixin' (a Texas term) to grant a loan on a property. They need someone they respect and whose judgment they trust to take a look at the property, confirm it is there, look at the immediate neighborhood and tell them if it's OK to make that loan. That's a pretty high compliment to me the appraiser. I'm personally honored that they value my opinion. It's one more sign that I'm earning their respect.
Let's look at this from another perspective...the appraiser's. The order comes in. The Client wants my opinion. I'm heading out to that neighborhood to do an appraisal tomorrow...already got the appointment set up....it's three blocks away from my appointment. My average drive time per field inspection is 30 miles one way. This 2075 will take me an additional five minutes of drive time, five minutes of observation time. The fee is typically $100.
Let's sum that up....5 minutes for the admin staff to create the order from the 2075 template; 5 minutes of drive time; 5 minutes of observation time; 5 minutes of report completion when I return to the office. Boss pays for the admin salary. I'm investing 15 minutes (maximum) to earn my $50 fee split. That's $200 per hour...not bad when there are no other expenses!
I just checked our Quick Books...Acorn has done 78 of those in the last year. That's 78 times our Cherished Clients have placed their faith in our opinion, and recognized that they see us as their eyes and ears in my market. That's 78 times Acorn has acted as a consultant to our Clients...paving the way for additional consulting assignments in the future....
Insulted? I'm honored!
Always seek new business. Always seek Cherished Clients. Up markets, down markets, it doesn't matter. Always seek new business. If your business is off this year, it might be a good time to review the Growing an Appraisal Business Series which appeared on Appraisal Scoop earlier in the year.
The author is the owner of Acorn Appraisal Associates, a 22 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities. kverrett@oak-acorn.com
I have the right to remain silent. Anything I say will be misquoted and used against me
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